ThePlay
Summer 2011
A quarterly publication of Chesapeake Energy Corporation
Distant lightning
behind Nomac
Rig #46 evokes an
energy-charged
atmosphere in the
Haynesville Shale,
the nation’s largest
producing natural
gas shale play.
CHK’s Reserves/Production
3.5
3.0
Average daily production (Bcfe/day)
Reserves in Bcfe
250,000
200,000
150,000
100,000
50,000
YE’ 2007
YE’ 2008
YE’ 2009
YE’ 2010
YTD’ 2011
Oil production
Natural gas production
Average operated rig count
Estimated rig count
Estimated oil production
Estimated natural gas production
200
175
150
2.5
125
2.0
100
1.5
75
1.0
50
0.5
25
0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 11E 12E
2005
2006
2007
2008
2009
2010
’11
0
The Play: Haynesville Shale
Average operated rig count
4.0
Unrisked, unproved reserves
Proved reserves
300,000
0
2
Production
Reserves
350,000
Contents Summer 2011
The nation’s top-producing natural gas shale
play enters a new phase of development
6
Rig Selection 101
The number one driller of natural gas in the
U.S., Chesapeake explains how it determines
the right rig for each well
8
ChK’s Operating Area Map
Powder River Basin Williston Basin
Niobrara and Frontier
Anadarko Basin
Cleveland, Tonkawa, Springer and Mississippian
Bakken and Three Forks DJ Basin
Marcellus Shale
Niobrara and Codell
The Play: Mississippi Lime
This Oklahoma-Kansas Play continues the
legacy of big-time oil and gas development
in the Mid-Continent field
10
Utica Shale
Commitment to Environmental
Excellence Finding better, more costeffective ways to produce energy
12
Inside Chesapeake
A closer look at the company’s
people and progress
Chesapeake Energy
Corporation is the secondAnadarko Basin
Texas Panhandle Granite Wash
Anadarko Basin
Colony Granite Wash
Haynesville Shale
Permian Basin
Delaware Basin
Permian Basin
Midland Basin
Natural gas plays
Liquids plays
States with CHK leasehold
Printed on recycled paper
Barnett Shale
Pearsall Shale
Eagle Ford Shale
Bossier Shale
largest producer of natural gas, a Top 15
producer of oil and natural gas liquids
and the most active driller of new wells
in the U.S. Headquartered in Oklahoma
City, the company’s operations are
focused on discovering and developing
unconventional natural gas and oil
fields onshore in the U.S. Chesapeake
owns leading positions in the Barnett,
Fayetteville, Haynesville, Marcellus and
Bossier natural gas shale plays and in
the Eagle Ford, Granite Wash, Cleveland,
Tonkawa, Mississippian, Wolfcamp, Bone
Spring, Avalon, Niobrara and Williston
Basin unconventional liquids plays. The
company has also vertically integrated
its operations and owns substantial
midstream, compression, drilling and
oilfield service assets.
ThePlay
Summer 2011
The Play: the active exploration for natural gas, or the area being explored
or leased; seismic activity, leasing, wildcatting in or on a trend.
Executive PRofile
Tom Price never met a stranger. And if he did,
chances are good that the stranger soon
would be driving a compressed natural gas
vehicle with an American flag in the window.
Because Price enjoys people, and he passionately believes in
Chesapeake Energy Corporation and its primary
product – natural gas – he is highly successful as
Chesapeake’s Senior Vice President – Corporate
“Today we enthusiastically
Development and Government Relations.
engage with the public to
A native Oklahoma Cityan, Price earned a trio
make sure people truly
of business degrees from the University of Central
understand our industry,
Oklahoma, the University of Oklahoma and the
as well as the temporary
Thunderbird School of Global Management in
inconveniences and the
Arizona. He honed his skills working in the natural
Tom Price
gas and oil industry as far back as the oil boom
long-term benefits.”
Senior Vice President –
post-OPEC embargo years of the 1970s and the
Corporate Development and
industry recession of the 1980s.
Government Relations
After serving as a consultant for the company during its first three years,
Price joined Chesapeake as Vice President – Corporate Development in 1992
when the company was a fraction of its present size. In 2000 he was promoted to Senior Vice President – Corporate Development and served as Senior Vice
President – Investor and Government Relations from 2003 to 2005, when he moved into his current position.
“When the Corporate Development department was created it was just me and an assistant,” he recalled. “In 1992 our community and legislative
engagement was not as expansive or as intense, primarily because the company’s operations were in areas with low population density and less public interest.
Our department’s objective centered on creating a business climate where Chesapeake could utilize its extraordinary land and drilling expertise by ensuring
our ‘customers’ saw themselves as beneficiaries of our company’s success. Few companies in our industry have looked at their stakeholders as customers. I
believe it is one of our true competitive advantages.”
Today the Corporate Development department manages a much broader range of issues. The Internet, social media, and much more active and wellfunded community and environmental activist groups have expanded communications of critical issues far beyond local areas. Additionally, elected officials
at all levels are more involved these days, spurred in part by public discourse fueled by social media. A protracted recession and quality of life concerns have
further shaped people’s misperceptions of the technologies used in today’s shale gas and oil exploration and production process.
“Today we enthusiastically engage with the public to make sure people truly understand our industry, as well as the temporary inconveniences and the
long-term benefits. We listen, we learn and we educate the public on how the merits of our operations and our product far exceed any drawbacks,” Price said.
“As our company has expanded geographically, our department has grown to include professionals in government and regulatory affairs, media and
strategic public relations, and experts in growing natural gas demand for uses such as transportation, power generation and expanded industrial applications.
In addition to our Oklahoma City headquarters staff, we have regional Corporate Development offices in Charleston, West Virginia; Harrisburg, Towanda and
Canonsburg, Pennsylvania; Columbus, Ohio; Shreveport, Louisiana; Denver, Colorado; and Austin and Fort Worth, Texas.”
Collaborating with almost every other department within the company, they work with numerous external publics: shareholders, royalty owners,
contractors and gas buyers. They also interface with people who influence public policy: individual voters, political action committees and elected officials
whose decisions will increasingly shape our nation’s energy future.
“I have been extraordinarily fortunate to recruit some amazing people with established integrity in the areas where the company operates,” Price explained.
“They have strong local contacts and credibility from years of community engagement. I appreciate their positive attitudes and respect for all our stakeholders.
They work enthusiastically under challenging conditions to enhance the reputation of our company and our industry, and I am extremely proud to work with
them. They have helped me enjoy a wonderful career here at Chesapeake.”
The Play Summer 2011
THE PLAY:
HAYNESVILLE SHALE
By Cheryl Hudak
FieldofDreams
2
Not much more than
three years ago, the
Haynesville Shale was
just a dream. Then
Chesapeake’s own
geoscientists and
Todd Waldron, EHS Field Specialist at the Ezernack
engineers discovered
10-9-13 H-1 in Sabine Parish, Louisiana.
this vast natural gas
reservoir in northwestern Louisiana and East Texas, and in
2008, the company opened the door to what is now the nation’s
largest producing natural gas shale play. Chesapeake has
proved reserves of 3,570 billion cubic feet equivalent (bcfe) on
more than 530,000 net leasehold acres in the Haynesville and
recently set a production record of more than 1.7 bcfe per day.
TODAY THE HAYNESVILLE SHALE IS
ENTERING A NEW PHASE.
(Continued on page 4)
vid McNeese
Photography by Da
The Play Summer 2011
ms
A quiet-running electric rig is
temporarily visible from the Evangel
Academy stadium in Shreveport. After
completion, the rig will be replaced by
an unobtrusive natural gas wellhead.
3
The Play Summer 2011
(Continued from page 3)
“We are coming to the end of the
held-by-production (HBP) phase in the
Haynesville Shale. During that period we
had to get a producing well on each 640acre spacing unit to keep the lease intact,”
said Chuck Duginski, District Manager –
Haynesville Shale. “Completing the HBP
phase is very important in every play. In one
as huge as the Haynesville, which has mostly
three-year leases expiring in 2010 or 2011, it
was truly a race against time.”
The stakes were further heightened
in 2010 with the discovery of another
rich natural gas reservoir, the Bossier
Shale, overlying the Haynesville by only
600 to 800 feet. Drilling to the deeper
quantity of data the company has gained
Haynesville will also hold production
from its 430 producing Haynesville wells, as
on much of Chesapeake’s 205,000-acre
well as nearly 400 non-operated producing
Bossier leasehold, because it overlaps
wells in which it partners.
the Haynesville and drilling rights extend
“Chesapeake has a huge
to the deepest formation
advantage
in the Haynesdrilled. The company’s
“Chesapeake has a
Bossier leasehold contains huge advantage in the ville,” Duginski continued.
approximately 4 trillion cubic Haynesville. We have “We have more data than any
feet equivalent (tcfe) of risked more data than any other operator and more inon how the Haynesville
unproved resources.
other operator and sight
Shale performs. We have a
“We will be taking a
more measured pace, now more insight on how base design that we’ve tested
the Haynesville Shale to establish the most effective
that we have met our HBP
performs.”
completion techniques. Now
requirements, and since
natural gas prices are softer,” said Duginski. we are doing the analysis to be sure that every dollar we spend on this development
“Currently Chesapeake is running 35 rigs
in the area. We will be ramping down a bit adds value to the company.”
The information gained from Haynesthis year to 15 rigs by the first of
2012, and seven to eight of those ville wells will also provide direction as the
will be drilling our first significant company proceeds with development of
the Bossier.
Bossier program.”
“We’ve penetrated the Bossier but not
The more mature stage will
completed many wells in it yet,” Duginski
be a time for analyzing the vast
4
An impressive hydraulic fracture completion
is underway at the Rice 17-17-15 H-1 in Caddo
Parish, Louisiana. Above left, the Dixie Farm
LLC 11-16-15 H-1 well is producing clean-burning
natural gas in Caddo Parish.
The Play Summer 2011
said. “We’ve got geological data but not the
performance data that we need to establish
its economic limits. We think it will be comparable to the Haynesville, costing marginally less to drill since it is slightly shallower.”
The maturation process in the Haynesville Shale will also put added emphasis on
safety awareness.
“Northwest Louisiana was kind of a
sleepy natural gas and oil province before
the Haynesville was discovered, and then
suddenly there it was – an enormous natural gas play with very high pressures. It was
a fast moving, highly demanding environment,” Duginski noted.
“Now we are getting our arms around
the operations, and we have a better understanding about the potential and hazards
of these wells. We will be paying attention,
building an operating culture with safety as
a top priority while maintaining a high level
of activity and a rapid pace.”
THE MATURING OF A SAFETY CULTURE
Tom Comer, EHS Coordinator in the Mansfield Field Office, looked
back at how far Chesapeake’s safety initiatives have come in the
three years of Haynesville Shale development.
“Three years ago John Cogar, Haynesville District Production Superintendent, had a vision of how the
Haynesville could be developed safely and efficiently,” Comer said. “With John’s help, we began to develop a
safety program. We started with the basics, like doing job safety analysis to identify the risks or hazards of a
specific job, then determining and implementing steps that could help us eliminate or control those hazards.”
Comer and his team, including field office environmental health and safety (EHS) specialists Todd
Waldron in Sligo and Ray Blanco in Mansfield, built a working relationship with Safety Management
Systems (SMS) to conduct on-site safety audits and execute corrective measures. Today the EHS team
works with 14 SMS specialists who rotate throughout
Haynesville operations in
Louisiana and Texas to provide
consultation with the Behavior
Based Safety program.
“Safety requires a top-down
commitment,” said Blanco. “Aubrey
McClendon and Steve Dixon, Chesapeake’s CEO and COO, and Steve
Turk – Vice President - Operations,
Southern Division, gave us this task
and focused us on safety. And now
I’ve seen 25 years of safety progress
in three years in the Haynesville.”
The challenge was compounded by the extensive use of
contract employees in the play.
“Every day we probably have
450 contract employees working on
our locations. They’re doing everything from well completions and
fracking to production, workovers,
coil tubing jobs and flowback testLocal fire chiefs watch as a manifold designed by Chesapeake’s Kirk Smith, Mansfield
ing,” Comer said. “You can double
Completion Superintendent, transports water from a 10" field pipe into a fire truck.
that number if you count sand and
water providers. With those numbers, you can see why contractor safety is a key – and why it’s mandatory.
We have open communications with those contractors, holding twice-monthly meetings where we explain
Chesapeake’s expectations very clearly. Our contractors are totally accountable.”
The team’s efforts are paying off; the total recordable incident rate in Haynesville Shale operations has
dropped by more than 60% in the past two years. The company’s safety efforts extend beyond its operating sites to neighboring communities, where we are working to build strong working relationships with local
safety, fire and emergency response groups.
Recently, the Chesapeake EHS group joined the District 8 Fire Department and the Louisiana State Fire
Marshal’s office to host fire chiefs and emergency response personnel from seven Louisiana parishes and
three Texas counties in the Haynesville Shale. One purpose of the meeting was to further educate emergency
responders on how the company’s fracture stimulation process operates by means of an on-site tour of a frack site
just outside Mansfield, Louisiana. The highlight of the event, however, was the demonstration of an innovative piece of equipment that will make water already on each frack site accessible in the rare event of a fire.
“The threading on oilfield pipe is built to a standard size, the National Pipe Thread (NPT), that is not
compatible with the national standard for fire pipe threading, called the National Fire Thread, or NFT,” Comer explained. “Since the two didn’t match up, we could not attach the two systems together to fight a fire –
despite the fact there are thousands of gallons of water at every frack site.”
That problem was remedied by Kirk Smith, Mansfield Completion Superintendent, who designed a
piece of equipment to connect a 10” water supply pipe typically used to supply water on a frack site to a
smaller fire department hose – and ultimately to a fire truck.
Fire chiefs and responders attending the demonstration watched water stream through the manifold
system at more than 20 barrels (1,000 gallons) per minute and were amazed to hear the system is capable of
doubling that water delivery. Manifolds will be used at each frack site in the Haynesville Shale, with the possibility of extending their use throughout the company.
“We want to work with responders and let them know how safe the fracking process is – and how we
are continually coming up with ideas to make it even safer,” Comer said.
5
The Play Summer 2011
By Laura Bauer
rigselection
6
BRONCO ACQUISITION
HELPS MEET DEMAND
IN JUNE 2011, CHESAPEAKE ADDED
22 NEW RIGS TO ITS FLEET WITH TWO
MORE UNDER CONSTRUCTION AND
GAINED MORE THAN 700 ADDITIONAL
EMPLOYEES THROUGH ITS ACQUISITION
OF BRONCO DRILLING COMPANY, INC.
THE BRONCO EMPLOYEES AND RIGS
BECAME PART OF NOMAC DRILLING, A
WHOLLY OWNED CHESAPEAKE SUBSIDIARY. BRONCO HAS BEEN DRILLING FOR
10 YEARS, AND ACCORDING TO STEVE
MILLER, CHESAPEAKE SENIOR VICE
PRESIDENT - DRILLING, ITS PEOPLE AND
RIGS ARE A GOOD FIT WITH CHESAPEAKE
BECAUSE IT IS A SOLID COMPANY WITH
THE RIGHT SIZED RIGS.
“THEY HAVE GOOD IRON AND THE RIGS
AVAILABLE TO HELP CHESAPEAKE KEEP
UP WITH DRILLING DEMAND,” HE ADDED.
“WE TRUST THEIR EXPERIENCE, AND
THEY ARE ABLE TO GO RIGHT TO WORK.
IT’S EXACTLY WHAT CHESAPEAKE NEEDS
TO KEEP UP WITH OUR AGGRESSIVE
DRILLING PROGRAM.”
THE FORMER BRONCO RIGS ARE CURRENTLY OPERATING IN NORTH DAKOTA, OKLAHOMA, PENNSYLVANIA AND TEXAS.
The Play Summer 2011
Drilling success begins with
choosing the right rig for the job
Nomac Rig #144 features a low profile carousel
that rotates drilling pipe. The carousel is
much shorter than a traditional rig mast and
therefore makes the rig ideally suited for urban
locations, especially near airports.
THE TECHNOLOGY:
RIG SELECTION
WITH MORE THAN 165 RIGS CURRENTLY DRILLING
Chesapeake’s Western Division, which includes ColoACROSS THE U.S. FOR CHESAPEAKE, CHOOSING WHICH rado, Wyoming, New Mexico, West Texas and North Dakota,
RIG TO USE TO DRILL EACH WELL IS A COMPLEX PROCESS. has its own set of unique considerations when determining a
As the most active driller in the country – with the second
location, which also affect the availability of rigs.
most-active driller having less than half as many rigs operat“All drilling activity must be coordinated to avoid dising – rig selection and execution becomes a critical skill that ruption of wildlife migration or activity during certain times
takes great expertise and planning. Chesapeake’s planning
of the year,” said Winchester.
process is built around a risk assessment approach.
In the company’s Eastern Division, most sites are rural,
“We have to consider the subsurface geology and tobut getting around is a major factor.
pography; location of access roads, pipelines and utilities;
“Since the rig has to be broken down into several pieces
proximity to the general public such as schools and houses; to move to a new site, we have to look at how mobile the rig is
available water sources; and proximity to wetlands, sensitive and its weight restrictions,” said Dave Bert, Chesapeake Vice
wildlife habitat or archaeological sites,” explained Steve
President – Drilling for Eastern Division. “With the mountainMiller, Chesapeake Senior Vice President – Drilling.
ous terrain and narrow roads in parts of West Virginia and
“Of course all decisions are made with
Pennsylvania, we prefer mobile rigs with
safety as the top priority.”
smaller loads for Marcellus Shale operaOnce a site is selected, the drilling
tions. Topdrive torque and rotary speed cateam determines which rig and crew are
pability are also important in order to drill
the best fit for the location.
longer horizontal laterals. We try to match
“The terrain and area where we are
fit-for-purpose rig equipment to the specifdrilling help us determine the size and
ic requirements of a well.”
specifications required,” explained Rene
Then there’s the “walking rig” –
St. Pierre, Chesapeake Vice President –
something that has revolutionized drillDrilling for the Northern Division. “Once
ing, according to Miller.
we know where, then we start to look at
“There are several traditional ways
rig requirements. We look at TVD (total Walking rig technology allows a rig to move in any direction to move or skid a rig using trucks and
vertical depth), what kind of hydraulics on a multiwell padsite.
bulldozers. Steel rails under a rig also
are needed, the casing load
allow it to slide in a single direction utilizing large hydraulic
weights and mobility of the rig. “THE TERRAIN AND
jacks,” explained Miller. “The rig walking system goes even
Tubulars are also important – the AREA WHERE WE ARE further – it allows the rig to move in any direction to the next
racking capacity – what the rig can DRILLING HELPS US
drilling location on a multiwell pad without laying down the
pull weight-wise. If there’s a need DETERMINE THE SIZE drill pipe, rigging down the topdrive and lowering the mast.”
for more pipe, for example, to drill
A technique Chesapeake uses in the Haynesville Shale
deep wells in western Oklahoma, AND SPECIFICATIONS Play in northwestern Louisiana and East Texas is only posthen the size of the rig needs to be REQUIRED.”
sible thanks to walking rig technology. In some locations, the
able to handle that. In addition, many wells require specialty process allows crews to drill multiple wells on a pad without
rig equipment such as hydraulic catwalks, iron roughnecks changing equipment, which saves time and resources.
and topdrives.”
Here’s how it works: At the site, the rig drills the topWith operations in 16 states, each region has its unique hole section. Then, without rigging down the mast or topset of challenges. And while topography is a major element, drive, the rig moves on hydraulic legs to the next wellbore
Chesapeake also considers whether the site is located in a
location on the pad and repeats the step. When that hole is
rural or urban area.
done, it moves to the next well. When all of the top-hole secIn the urban Barnett Shale in North Texas, the presence tions are complete, the rig is retrofitted and the rig retraces
of more than 50 municipal, county, state and federal regulato- its steps to complete the next phase of the drilling process,
ry agencies creates more variables in the rig selection process. moving back and forth across the set of wells until all the
“One unique regulation for drilling at the Dallas/Fort
steps are completed – similar to an assembly line.
Worth International Airport is that the total height of the rig
“This method reduces the number of drilling days per
cannot exceed 110 feet,” explained Dave Winchester, Ches- well – saving Chesapeake both time and money. It allows us
apeake Vice President – Drilling for Southern and Western to use one retrofit for a series of wells instead of one retrofit
Divisions. “Most rig masts are at least 140 feet, and this regu- for a single well,” Miller explained.
lation has been met with the use of fit-for-purpose NomacRunning the country’s most aggressive drilling proowned Drillmec rigs, which have a mast height of 102 feet.” gram takes teamwork, expertise and precision. Just like evMost Barnett Shale sites also have load, road, sound
ery tool a mechanic uses serves a specific purpose, each rig
and air emission restrictions. Many factors are considered to in Chesapeake’s fleet has a unique set of features tailored to
ensure Chesapeake is meeting them. For example, to com- meet the needs of specific regions.
bat noise, sound walls are placed around many sites, and to
“It’s our job to ensure the right rigs are drilling the right
reduce air emissions, some rigs are fueled by natural gas or holes,” Miller added. “Even with our large fleet and extensive
highline electric power.
operations, it’s still only possible because we have the best
team in the industry.”
7
The Play Summer 2011
The Play:
Mississippi Lime
O-i-l
The Mid-Continent region
extending from northern Kansas to
north Texas historically has produced
more oil than any area in the U.S.
Until the discovery of oil in the
Middle East, the Mid-Continent was
one of the two largest known
reserves in the world. and Oklahoma,
with the sixth-largest oil reserves
in the nation, has been a major
contributor to the mid-continent’s
success for more than a century.
Photography by David McNeese
8
The Play Summer 2011
By Cheryl Hudak
How do you spell Mississippi in Oklahoma?
l
The Mississippian Play is
helping to reenergize the legacy
of the Mid-Continent region from
5,000 to 8,000 feet beneath the
prairies of northern Oklahoma
and southern Kansas. The play,
also referred to as the Mississippi Lime, is
comprised of a complex geological mix of
fractured limestone and chert that contains
a number of distinct, trapped reservoirs.
The play is located just north of Chesapeake’s formidable Sahara Play, where the
company’s vertical wells have been producing natural gas for more than 11 years. Today
however, those vertical unconventional gas
wells are being supplanted by horizontal wells
targeting oil rather than gas, because oil has
a significantly higher price than natural gas.
Chesapeake began its Mississippian
drilling in February 2007 with the Howell
1-33H, which had initial production in May
2007, of 361 barrels of oil per day (bo/d) and
432,000 cubic feet (mcf) of natural gas. In
January 2009 the company’s efforts were
rewarded when the Serenity 1-3H broke initial production records for the area at 1,243
bo/d and 1,104 mcf of gas.
Ted Campbell, Northern Mid-Continent
District Manager, leads a Chesapeake multidisciplinary team developing more than
1.0 million net leasehold acres primarily in
Woodward, Woods and Alfalfa counties,
Oklahoma; and Harper, Sumner, Barber and
Comanche counties, Kansas. As one of the
play’s largest leaseholders, Chesapeake’s
acreage contains more than 6,000 prospective wellsites. So far, the company has drilled
60 wells in the play and currently operates
five rigs. Most of the Mississippian wells
reach 9,500 to 10,000 feet total depth after
Drilling in Woods County, Oklahoma, Nomac crews work
around the clock. At left, the crew of Nomac Rig #23 ignores
temperatures above 100 degrees on the Heasley 1-13H. Above
and right, red earth and harsh rock outcroppings make for
rugged terrain where Nomac Rig #35 rises along the skyline
on the Brown 35-29-16H wellsite.
24-30 days of turning to the right. All are hori- variations that occur within the Mississippian
zontal. In fact, advanced horizontal drilling strata that underlie a broad area extending
and completion techniques are critical to
from Nebraska through central Oklahoma.
success in this field.
“We have built a multi-disciplined
“Horizontal drilling provides great de- development team that is responsible for
liverability,” Ted Campbell said. “We have all our evaluation activities focused on the
good, solid finding costs in this play which Mississippian rocks in the Mid-Continent
leads to an attractive rate of return.”
region,” Pat Rolla, Geoscience Manager,
“The Mississippian is not one big carbon- Southern Mid-Con District, Northern
ate play,” said Bob Campbell, Chesapeake’s Division, said. “This team helps us meet
Geoscience Manger, Northern Mid-Con Dis- the reservoir characterization challenges
trict, Northern Division. “We are in the lime- that result from the highly varied deposi‑
stone and the chert. Because we are dealing tional and structural history that is charac‑
with a number of separate reservoirs up here, teristic of the Mississippi. Through the
horizontal drilling and the application of new team’s efforts, we can dedicate more
hydraulic fracturing technology
resources to evaluating the
allow us to connect the dots of “We get 50% higher Mississippian’s potential over
those limestone and chert reser- reserves than our a broad area.”
voirs for better results.”
Another unique aspect of
Ted Campbell agreed that competitors for
the Mississippian Play is the
completions are a key to success. about 20% higher amount of water produced
expense.”
“We use bigger fracks up
along with the oil and natural
here,” he said. “On the 50-plus wells Ches- gas. Water is produced in the formation beapeake operates in this play, we used
cause the oil and gas occurs in a transition
10-stage fracks averaging 55,000 barrels of zone with associated water. The company
water and 2 million pounds of sand. The
gained valuable experience in dealing with
non-operated wells we’re involved with
water from its activities in the Hunton dewawere completed in nine stages with less wa- tering play in northwestern Oklahoma, but
ter and sand. So we may spend a bit more on team members agree that dealing with water
our completions, but our average estimat- is not for the fainthearted.
ed ultimate resources runs just under 2 bil“We are continually looking at water
lion cubic feet of equivalent (bcfe) per well, and the cost of handling it,” Bob Campbell
compared to 1.3 bcfe for our competition. pointed out. “We transport the produced
water via trucks and an expanding pipeline
infrastructure to multiple Chesapeake-operated disposal wells that are drilled to the
Arbuckle Formation, more than 1,000 feet
deeper than the Mississippian. The Arbuckle
is a deep, porous formation commonly used
as a water disposal zone. Handling saltwater and disposing of it properly represents a
large capital expenditure.”
Those costs have put smaller companies
at a disadvantage in the Mississippian Play,
We get 50% higher reserves than our com- because they have to invest in deep disposal
petitors for about 20% higher expense.”
wells or pay water disposal fees. The play has
Although completion is a key to success, traditionally been a strong operating area
Ted Campbell asserts that the company’s op- for small independents, and oil prices make
erating culture is even more important, with their holdings increasingly valuable. As a
close cooperation and camaraderie between result, the Mississippian continues to be an
field personnel and Oklahoma City staff.
exciting prospect for large and small compaThat camaraderie extends throughout nies alike, with tickets for a recent Oklahoma
the Mid-Continent District, where a multi-dis- Geological Survey seminar about the play
ciplinary task force of scientists and reservoir sold out within a two-hour span.
technologists from the Northern and SouthLarge or small, E&P companies are eaern Mid-Continent and New Ventures groups ger to get in on the new boom in northern
working together to share knowledge and
Oklahoma, where the spelling of Mississippi
ideas. The team examines the big picture,
is a three-letter word – O-I-L.
seeking regional structural and depositional
9
The Play Summer 2011
THE ENVIRONMENT:
DEDICATED TO EXCELLENCE
CHESAPEAKEʼS
Commitm
TURNING COMMITMENT INTO ACTION
10
The Play Summer 2011
IN RECOGNITION OF ITS COMMITMENT
TO ENVIRONMENTAL EXCELLENCE,
CHESAPEAKE HAS DEVELOPED AND IS
IMPLEMENTING A NUMBER OF FOCUS
PROGRAMS, INCLUDING:
Greener Operations – Above,
Chesapeake employees conduct
a tailgate meeting to discuss
Best Management Practices
at one of the company’s
more than 21,000 operated
producing wells. Right, a lone
paint horse grazes while a truck
collects water from a West
Virginia location in accordance
with the company’s waste
management plan.
Transparency in the Use of
Chemicals – Continue disclosing hydraulic fracturing ingredients to state
regulatory agencies and the disclosure
registry at www.fracfocus.org
Water Sourcing and Use –
Effectively plan, manage and reduce
where possible the use of freshwater
in our operations
Managing Produced Water –
Recycle produced water as much as
practical and store the remainder in
enclosed surface tanks with secondary
containment until disposed of in a
government-approved underground
injection control well
Preserving Air Quality – Design,
build and monitor the integrity of our
facilities and pipelines to reduce air
emissions associated with natural gas
and liquid hydrocarbons production
Well Design and Construction –
Meet or exceed state requirements
in the design, drilling, completion and
testing of wellbores to protect freshwater sources, control well pressures
and avoid migration of gas behind
casing strings
Limiting Surface Impacts – Reduce
our impact to landowners, communities and the environment by limiting
the size and number of surface disturbances, avoiding or minimizing our
impact to environmentally sensitive
areas, utilizing existing infrastructure
when practical and developing maintenance agreements to protect and
maintain the roads we use
Pre-construction Environmental
Assessment – Conduct reviews to
identify environmentally sensitive
habitats, wetlands, other water re-
sources and culturally significant locations prior to construction to avoid
sensitive resources when practicable
Waste Management – Handle,
transport and dispose of waste according to regulations; utilize current
technology to reduce the likelihood
of spills, reduce waste volumes and
recycle or dispose of waste volumes
where appropriate according to our
waste management plans
Best Management Practices
(BMPs) – Apply and continuously
improve our BMPs to achieve and
maintain an industry-leading position
in safe, clean operations
Public Outreach and
Collaboration – Engage and
educate shareholders, stakeholders
and affected parties, identify opportunities for further improvement,
support high-quality research and
provide public education
By Brandi Wessel
ment
to Environmental Excellence
THE PHRASE “IT’S A SMALL WORLD
AFTER ALL,” HAS NEVER BEEN TRUER
THAN IN TODAY’S GLOBAL ENVIRONMENT.
WEATHER PATTERNS AFFECT FUEL
CONSUMPTION, WHICH IN TURN AFFECTS
NATURAL GAS PRODUCTION AND THE
PRICE OF YOUR HOME HEATING BILL.
The same is true for the environmental impact of fuel consumption
and production, sending out ripples
that impact people’s lives near and
far, today and in the future.
As Chesapeake strives to help
meet America’s growing energy demand, the company recognizes that
the way a product is produced is as
important as the product itself.
“Clean-burning natural gas is the
most environmentally friendly fossil
fuel available, and when developed
properly has a lower overall environmental footprint than many renewable sources,” said Paul Hagemeier,
Chesapeake Vice President - Regulatory Compliance. “While you can’t argue the environmental advantages it
has over coal and oil, we realize that
the way we conduct our day-to-day
operations also has an impact on the
environment.”
In an effort to emphasize the importance of minimizing its environmental footprint, Chesapeake has
established its Commitment to Environmental Excellence. As part of this
program, the company has adopted
the following core values:
■ Business Philosophy – Protect
natural resources, care for the
environment and comply with all
applicable laws and regulations
■ Operational Excellence –
Strive for excellence, and be
satisfied with nothing less
■ Commitment of Resources – Provide necessary resources to achieve
clean, safe operations
Continuous Improvement –
Continuously evaluate environmental protection measures to improve
operating practices and reduce the
company’s environmental footprint
■ Support of Industry Regulation –
Support science-based regulation
that ensures safe, responsible
operations
■ Community Focus – Always strive
to be a charitable, engaged and responsible community partner
The company recognizes, however, that simply establishing a set of
core values doesn’t equal perfection.
“Our goal is zero incidents,” said
Hagemeier. “If an incident does occur, our employees will move quickly
to correct it. After that, we work with
Operations to review the incident
and see what could be or should
have been done differently. We take
that information and apply it in the
field to prevent future incidents.”
As part of the program’s rollout,
employees attended training sessions focused on how these core
values apply to each employee’s job
and responsibilities.
“Because each field employee
plays a vital role in maintaining these
values, we want to make sure everyone – from the CEO to our vendors
and contractors – knows what is expected of them,” said Hagemeier.
■
11
“OUR GOAL IS ZERO
INCIDENTS. IF AN
INCIDENT DOES OCCUR,
OUR EMPLOYEES WILL
MOVE QUICKLY TO
CORRECT IT.”
EHS Field Specialist Kade Kusik uses a
state-of-the-art FLIR camera to search
for possible emissions leaks.
The Play Summer 2011
insideCHK
12
A closer look at Chesapeake’s people and progress
Pumper Jeremy Hamill was in for a
surprise last April when he went by the
Giant 1-7 wellsite in Woods County, Oklahoma, on his morning rounds. He noticed
something strange at the top of the stairs leading to the
20-foot-high tank battery
Female red-tailed catwalk and climbed
to take a closer look.
hawks can measure up
There,
eye to
up to 26 inches long eye withheacame
highly irate
with a wingspan female red-tailed
hawk,
of 52 inches.
who had built a nest on
the catwalk. Female red-tailed hawks can measure up
to 26 inches long with a wingspan of 52 inches.
Hamill quickly learned that a nesting bird of prey
is not particularly hospitable, and he called Production
Supervisor Richard Meiser to give him the news. Fortunately, the Giant 1-7 is equipped with external sight gauges, so the nest did not interfere with well readings. The
Chesapeake production team nicknamed the bird Ruby
Red and kept an eye on the nest, noting that there were
probably two baby red-tails in the nest with Mom. However, members of the team were quick to admit that she
did not allow them in the nursery.
“She was extremely protective, to say the least,”
said Greg Northern, Pipeline Technician I for Chesapeake Midstream Partners, who visited the site to photograph the temporary resident atop the natural gas
well’s catwalk.
By the end of May, the hawks had flown the coop.
Now the Chesapeake production team is looking forward to next year, since birds often return to the same
territory to nest.
ThePlay
is designed and published each quarter by the Corporate
Development Department of Chesapeake Energy
Corporation, P.O. Box 18128, Oklahoma City, OK 73154-0128.
Telephone 405-935-4761
Email the editor, Cheryl Hudak, at publications@chk.com.
“The Play” is online at www.chk.com under Media Resources.
This publication includes “forward-looking statements” that give our current expectations or forecasts
of future events, including estimates of oil and natural gas reserves, projected production and future
development plans. Factors that could cause actual results to differ materially from expected results are
described in “Risk Factors” in the Prospectus Supplement we filed with the U.S. Securities and Exchange
Commission on July 10, 2008. These risk factors include the volatility of natural gas and oil prices;
the limitations our level of indebtedness may have on our financial flexibility; our ability to compete
effectively against strong independent natural gas and oil companies and majors; the availability
of capital on an economic basis, including planned asset monetization transactions, to fund reserve
replacement costs; our ability to replace reserves and sustain production; uncertainties inherent in
estimating quantities of natural gas and oil reserves and projecting future rates of production and
the amount and timing of development expenditures; uncertainties in evaluating natural gas and oil
reserves of acquired properties and associated potential liabilities; our ability to effectively consolidate
and integrate acquired properties and operations; unsuccessful exploration and development drilling;
declines in the values of our natural gas and oil properties resulting in ceiling test write-downs; risks
associated with our oil and natural gas hedging program, including realizations on hedged natural
gas and oil sales that are lower than market prices, collateral required to secure hedging liabilities and
losses resulting from counterparty failure; the negative impact lower natural gas and oil prices could
have on our ability to borrow; drilling and operating risks, including potential environmental liabilities;
production interruptions that could adversely affect our cash flow; and pending or future litigation.
Although we believe the expectations and forecasts reflected in our forward-looking statements are
reasonable, we can give no assurance they will prove to have been correct.
The Play Summer 2011
Chesapeake production team
Going to the birds in
northern Oklahoma
Fiercely protective of her nest, Ruby Red
deflects production crew members who
approach her residence on the catwalk
of a Chesapeake wellsite.
Chesapeake was recognized by International Data Group’s
(IDG) Computerworld magazine as #7 in its 2011 list of 100 Best Places
to Work in IT. In 2011 the company ranked #17 in
the list of honorees.
“It is a great
The annual award ranks the top 100 organizations that challenge technology professionals while
honor for us to
providing great benefits and compensation. Honorees are chosen through a comprehensive question- be recognized
naire regarding company benefits, diversity, career development, training and retention.
again this year.”
“It is a great honor for us to be recognized again this year,” said Cathy Tompkins, Senior Vice President
of Information Technology and Chief Information Officer. “This award reflects the commitment of our management to make
sure Chesapeake has the best technology and information systems in the energy industry, and that we can attract the best IT
people from all over the country.”
The company was recognized for its innovative work environment and commitment to provide employees with firstclass resources and exposure to the latest technology, its own and industry-leading business practices and for creating
a corporate culture of continuous learning and concern for employee well-being.
National information technology
award recognizes Chesapeake for
second consecutive year
13
Raising the roof - 30 Ohio Chesapeake employees work
with the Habitat for Humanity of Greater Stark & Carroll
Counties to build three homes for area residents. Volunteers
literally work from top to bottom, helping build the roof and
installing siding and framing for the homes.
Groundbreaking joint venture
gains Chesapeake Oil and Gas
Investor Excellence Award
Chesapeake’s $2.2 billion Eagle Ford Shale joint venture
transaction with CNOOC Limited (NYSE:CEO; SEHK:0883)
was named the 2010 M&A Deal of the Year by Oil and Gas Investor magazine. The award was presented to CEO Aubrey
McClendon at Hart Energy’s annual Energy Capital Conference in Houston on June 2, 2011.
The transaction was recognized as groundbreaking because it involved Chesapeake, a premier U.S. oil and gas producer, and CNOOC Limited, a Chinese multinational company, in a partnership to develop the Eagle Ford Shale in South
Texas. The publication went on to recognize Chesapeake “for
all of the joint venture transactions it has completed over the
past four years that have changed the shale and acquisition
and divestiture landscapes.”
The company also received the publication’s M&A Deal
of the Year award in 2005 for its acquisition of Columbia Natural Resources in Charleston, West Virginia.
The Play Summer 2011
T